Sara Lee 2013 Annual Report Download - page 54

52 The Hillshire Brands Company
NOTES TO FINANCIAL STATEMENTS
Information related to our cash flow hedges, net investment
hedges, fair value hedges and other derivatives not designated as
hedging instruments for the periods ended June 29, 2013, and
June 30, 2012, follows:
Interest Rate Foreign Exchange Commodity
Contracts Contracts Contracts Total
June 29, June 30, June 29, June 30, June 29, June 30, June 29, June 30,
In millions Year ended 2013 2012 2013 2012 2013 2012 2013 2012
CASH FLOW DERIVATIVES
Amount of gain (loss) recognized in
other comprehensive income (OCI)1$– $(8) $– $÷÷«– $÷6 $13 $÷6 $÷÷«5
Amount of gain (loss) reclassified
from AOCI into earnings 1, 2 –(3)–2182181
Amount of ineffectiveness recognized in earnings3, 4 – – – (2) (1) 2 (1) –
Amount of gain (loss) expected to be reclassified
into earnings during the next twelve months ––––(2)10(2)10
NET INVESTMENT DERIVATIVES
Amount of gain (loss) recognized in OCI1–––604–––604
Amount of gain (loss) recognized from OCI into earnings6– – – (446)–––(446)
Amount of gain (loss) recognized from OCI into spin-off dividend7–––324–––324
FAIR VALUE DERIVATIVES
Amount of derivative gain (loss) recognized in earnings5–1–––––1
Amount of hedged item gain (loss) recognized in earnings5–4–––––4
DERIVATIVES NOT DESIGNATED
AS HEDGING INSTRUMENTS
Amount of gain (loss) recognized in Cost of Sales ––––(2)(2)(2)(2)
Amount of gain (loss) recognized in SG&A –––(15)2–2(15)
1 Effective portion.
2 Gain (loss) reclassified from AOCI into earnings is reported in interest or debt extinguishment, for interest rate swaps, in selling, general, and administrative (SG&A) expenses for foreign exchange contracts and in cost
of sales for commodity contracts.
3 Gain (loss) recognized in earnings is related to the ineffective portion and amounts excluded from the assessment of hedge effectiveness.
4 Gain (loss) recognized in earnings is reported in interest expense for foreign exchange contract and SG&A expenses for commodity contracts.
5 The amount of gain (loss) recognized in earnings on the derivative contracts and the related hedged item is reported in interest or debt extinguishment, for the interest rate contracts and SG&A for the foreign exchange contracts.
6 The gain (loss) recognized from OCI into earnings is reported in gain on sale of discontinued operations.
7 The gain/(loss) recognized from OCI into the spin-off dividend is reported in Retained Earnings as a result of the spin-off.
NOTE 16 – DEFINED BENEFIT PENSION PLANS
The company sponsors two U.S. and one Canadian pension plans
to provide retirement benefits to certain employees. The benefits
provided under these plans are based primarily on years of service
and compensation levels.
MEASUREMENT DATES AND ASSUMPTIONS
A fiscal year end measurement date is utilized to value plan assets
and obligations for all of the company’s defined benefit pension plans.
The weighted average actuarial assumptions used in measuring
the net periodic benefit cost and plan obligations of continuing
operations were as follows:
2013 2012 2011
Net periodic benefit cost
Discount rate 4.2% 5.5% 5.4%
Long-term rate of return on plan assets 6.2% 6.5% 7.3%
Plan obligations
Discount rate 4.8% 4.2% 5.5%
The discount rate is determined by utilizing a yield curve based
on high-quality fixed-income investments that have a AA bond rating
to discount the expected future benefit payments to plan participants.
Compensation increase assumptions are based upon historical expe-
rience and anticipated future management actions. Compensation
changes for participants in the U.S. plans no longer have an impact
on the benefit cost or plan obligations as the participants in the U.S.
salaried plan will no longer accrue additional benefits. In determining
the long-term rate of return on plan assets, the company assumes
that the historical long-term compound growth rates of equity and
fixed-income securities and other plan investments will predict the
future returns of similar investments in the plan portfolio. Investment
management and other fees paid out of plan assets are factored into
the determination of asset return assumptions.